UPS reports revenues growth but operating profits face headwinds

TIN news:  UPS saw revenues increase by 6.2% during the first quarter of the year but fuel costs and currency effects put pressure on operating profits.

The US express and logistics giant saw first-quarter revenues increase to $15.3bn from $14.4bn last year, while operating profits declined by 2.4% on a year earlier to $1.9bn and net profits increased by 2.4% to $1.2bn.

UPS said revenues had grown across all three segments, with notable improvements in domestic package yields and e-commerce demand.

Operating profits were affected by exchange rates and increased fuel costs. With exchange rate effects stripped out, UPS would have registered an improvement in operating profits.

Looking at the individual divisions, the international segment registered a 4.9% improvement in revenues to $3bn and operating profits slipped 7.8% to $529m. Currency had a $119m drag on results for international.

“The International segment generated strong top-line growth with increased demand for cross-border shipments,” UPS said.

“Export shipment growth was strong across all UPS regions, as customers took advantage of our expanded portfolio and industry-leading customs brokerage solutions.”

Supply chain and freight saw revenues improve by 12.5% year on year to $2.7bn, while operating profits increased 21.8% to $179m.

UPS chairman and chief executive David Abney said: “The team has been working on growth initiatives, cost reduction programmes and business unit portfolio strategies to address unique market conditions for the last several quarters.  These initiatives showed excellent progress.”

Tonnage increases were registered in freight forwarding, while UPS Freight increased revenue. Healthcare, retail and aerospace sector performance enhanced the distribution businesses’ results.

Lastly, US domestic saw revenues increase by 5% year on year to $9.5bn and operating profits decreased by 2.4% to $1.1bn.

The domestic segment benefitted from strong demand for e-commerce deliveries. UPS also implemented base rate pricing actions. Next day air and deferred air shipments were up 3.9% and 4.1% respectively.

Headwinds from a fuel surcharge lag, some unusual weather and a facility fire totalled about $50m in one-time costs this quarter for the domestic division.

The domestic division also revealed that construction projects are underway on 17 facility projects to support growth.

“Revenue came in strong this quarter with all segments adding to the topline,” said Abney.

“We are accelerating investments to create the industry’s leading smart global logistics network and value-creating portfolio. UPS customers are benefiting from expanded capacity, choice and improved time-in-transit, while technology solutions continue to deliver efficiencies.”